GM Halts South Africa Carmaking After Wage Talks Collapse

General Motors Co. (GM) and Bayerische Motoren Werke AG (BMW) halted production at their South African plants as a strike by more than 220,000 metalworkers disrupted car-component makers and turned violent.

Police arrested 26 people yesterday after several incidents of attacks, intimidation and vandalism at factories around Johannesburg. Wage talks failed after the National Union of Metalworkers of South Africa rejected an improved offer from the Steel and Engineering Industries Federation of Southern Africa, the employer group.

The stoppage that began on July 1 threatens about a third of South Africa’s manufacturing output, prompting Moody’s Investors Service to warn that the nation’s credit rating may be at risk. It follows a five-month strike by more than 70,000 platinum miners that caused the economy to contract in the first quarter of the year.

Seifsa, as the employers’ group is known, said yesterday its offer to raise wages for the lowest-paid workers by 10 percent this year was the best it could make. No further talks are planned with Numsa, which is demanding a 12 percent pay increase and a ban on labor brokers.

General Motors shut its plant in the eastern coastal city of Port Elizabeth as “the strike in the metal and engineering sector has impacted upon supply of components to our production line,” Gishma Johnson, the company’s spokeswoman, said in an e-mailed statement.

Photographer: Mujahid Safodien/AFP via Getty Images

Workers hold placards as they demonstrate on the first day of a nationwide strike called by South Africa's National Union of Metalworkers to demand a pay raise and better working conditions, in Johannesburg, on July 1, 2014. Close

Workers hold placards as they demonstrate on the first day of a nationwide strike... Read More

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Photographer: Mujahid Safodien/AFP via Getty Images

Workers hold placards as they demonstrate on the first day of a nationwide strike called by South Africa's National Union of Metalworkers to demand a pay raise and better working conditions, in Johannesburg, on July 1, 2014.

Plant Maintenance

BMW brought forward a week of planned maintenance at its plant outside Pretoria, halting production on July 1, spokesman Guy Kilfoil said. The factory will reopen on July 8 with two shifts instead of the normal three if the strike continues, which could result in the loss of 120 vehicles a day, he said.

“If the strike goes beyond two weeks, the risks to vehicle manufacturers and production plants will increase substantially,” Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa, said by phone from Pretoria.

A Numsa strike over pay at carmakers between August and October last year cost the industry at least 20 billion rand ($1.8 billion) in revenue, according to Naamsa.

Labor Minister Mildred Oliphant held separate meetings with union leaders and employers yesterday to help resolve the strike.

Consulting Time

“The union asked to be given time to consult and said they would revert to us early next week,” Mokgadi Pela, Oliphant’s spokesman, said by phone from Johannesburg today. “We have said let’s allow their consultation process. We are quite confident” the strike will end soon, he said.

While an agreement on wages was close to being reached, the union’s demands for employers to cease using brokers and taking advantage of a state-backed youth wage subsidy remained sticking points, Pela said.

Numsa spokesman Castro Ngobese did not respond to calls to his mobile phone today.

The strike has been marred by violence. In Benoni, east of Johannesburg, more than 2,000 workers forced their way onto business premises, damaging equipment and computers, police said in an e-mailed statement yesterday. Protesters were shot with rubber bullets after stoning police and breaking through a factory gate in Elandsfontein.

Power Plants

Companies including Bell Equipment Ltd. (BEL) and Evraz Highveld Steel & Vanadium Ltd. as well as units of Murray & Roberts Holdings Ltd. and Aveng Ltd. (AEG) are affected by the stoppage. The strike is also harming construction at Eskom Holdings SOC Ltd.’s Medupi and Kusile power plants.

Numsa denied allegations that its members were involved in violence, saying in a statement two days ago that the reports are “part of a cheap ploy by the employers to undermine the integrity of our struggle for a living wage and improved conditions of employment.”

To contact the reporters on this story: Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net; Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net John Bowker, Zoe Schneeweiss

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